ESS interests with a taxing point before 1 July 2009
The tax rules applying to employee share scheme interests (ESS interests) acquired under an employee share scheme before 1 July 2009 that also had a taxing point before 1 July 2009 are different to the current rules. This information explains those rules – which were contained in former Division 13A of Part III of the Income Tax Assessment Act 1936 – with examples of some common issues. We recommend you read it in conjunction with the Guide to capital gains tax.
The Division 13A rules were repealed, effective from 14 December 2009. Division 83A of the Income Tax Assessment Act 1997 contains rules that apply to ESS interests (shares or rights) acquired on or after 1 July 2009.
The Division 83A rules also apply to some shares or rights that were acquired before 1 July 2009 under transitional rules. These shares and rights are known as transitioned interests. However, the Division 13A rules are still relevant to determining if the interests you acquired before 1 July 2009 are transitioned interests. The Division 13A rules continue to apply (despite its repeal) to shares or rights that did not transition to the new rules.
For ESS interests that were acquired before 1 July 2009 to which a cessation time has not yet happened, the deferred taxing point will be calculated with reference to the rules in Division 13A. However, these ESS interests, as well as all ESS interests acquired on or after 1 July 2009 under Division 83A, will be subject to the new CGT rules outlined under Division 83A. This document contains information about the CGT rules that apply to ESS interests with a cessation time prior to 1 July 2009.
What are transitioned interests?
The new rules in Division 83A apply to shares or rights (ESS interests) that you acquired before 1 July 2009 if:
- they are qualifying shares or rights under the old rules, and
- you have not elected to be taxed upfront under the rules, and
- a cessation time has not happened to the shares or rights before 1 July 2009 under the old rules.
Under the transitional rules, some of the old rules in Division 13A are preserved. Also, some of the new rules do not apply, or are modified in the way that they apply to a transitioned interest.
What are not transitioned interests?
The old rules continue to apply to:
- a share or right that was not qualifying under the old rules
- a qualifying share or right where you elected to be taxed upfront under the old rules
- a qualifying share or right where a cessation time had happened to the share or right before 1 July 2009 under the old rules.